Personal Injury Claims: How Has The Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) Act Changed The Landscape?

Has the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) which came into force on 1st April 2013 changed the landscape for personal injury compensation claims?

The answer is yes, undoubtedly; in fact you could go so far as to say that it has fundamentally and irrevocably changed the way in which personal injury claims costs are recovered, as many lawyers and legal experts predicted it would.

What was the rationale behind these fundamental changes? Well, they were introduced by Parliament to counter the rise in the cost of insurance claims and premiums which had been escalating for over a decade. The increased costs were cited as evidence of the UK’s growing ‘Compensation Culture.’

What has changed since the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) came into force?

Damages-based agreements.

Damages-based agreements (contingency fees) were previously only allowed in non-contentious matters. Under LAPSO solicitors can charge their clients a percentage of any compensation that they recover. However, if solicitors now wish to charge a Success Fee, they must take it from their client’s damages awards. The maximum figure that any solicitor can take is 25%. A Success Fee is a percentage-based risk fee that a solicitor is able to charge to the other party, on top their base costs incurred throughout the case. This fee is no longer recoverable from the defendants since April 2013.

The ban on referral fees.

From 1 April 2013, the receipt of referral fees by regulated persons in personal injury matters was prohibited. This inevitably has since led to a decline in the number of personal injury claims being made, and to significant changes for Claims Management Companies, which have now been forced to fundamentally alter the way in which they operate. The Insurance Industry had claimed that Claims Management Companies were not vetting personal injury claims effectively enough, and were allowing claims with little chance of success to be passed onto solicitors for a fee.

The prevention of the recovery of Additional Liabilities.

LASPO legislation has prevented a party recovering the cost of an ‘after the event’ insurance premium from the other side, in many cases. Previously a claimant could take out an insurance policy to cover against the possibility of losing a case and becoming liable for the defendant’s costs, and could recover the cost of this premium from the defendant if the claim was successful.

Other changes.

Lord Jackson proposed that the fixed costs regime for road traffic accidents via an online fast-track portal system would be extended to employers’ and public liability claims. This change was introduced on 31 July 2013. The portal now covers claims up to the value of £25,000 in personal injury motor claims, and also includes employer’s liability and public liability claims up to a value of £25,000.

Increased damages.

In order to counteract the proposed new damages-based agreements where a solicitor is entitled to take a percentage of the claimant’s damages, damages were increased by 10%, following the Court of Appeal decision in Simmons v Castle.